The Rundown - Honda and Nissan Explore Merger, Fed Meeting Wraps Up

Episode Date: December 18, 2024

Stock market update for December 18, 2024.

Public.com presents the rundown. Your daily market update in five minutes. My name is Zadadmani, and today is Wednesday, December 18th. In today's episode, we get you ready for the Fed meeting today. What is Jerome Powell going to do? We also discuss a potential merger between Honda and Nissan that could shake up the auto industry. Then stick around to the end of the show to find out why NVIDIA stock is up today and how much money Instagram is expected to make next year. Let's go. Yesterday it was a pretty tough day in the stock market, except for Tesla, which somehow went up another 3% setting a new record high. But outside of that, things were pretty bad.

Both the S&P and NASDAQ were down more than 0.3% on Tuesday, with more than 75% of stocks in the S&P 500 finishing in the red. And we have to talk about the Dow again. It's gone down for nine straight days in a row, which is the longest streak since 1978. And you know what? it doesn't matter. We shouldn't care. Because remember, the Dow Jones Index only consists of 30 companies. And the index isn't even market cap weighted. So honestly, the Dow could drop for 20, 30, 40 days in a row. And I wouldn't care because it's not a reflection of the overall markets. It's only a reflection of the 30 companies in the index. You know, as long as the S&P and NASDAQ keep

moving higher, that's all good with me. I had to get that out. Wasn't expecting to go on another rant. Now, remember, today the Fed meeting wraps up. We've been hyping it up all week. will officially know what the Fed decides to do with interest rates this afternoon. Right now, the markets are pricing in a 95% chance of a 25 basis point cut. So anything outside of that would be pretty shocking. But I think investors are going to be paying more attention to Jerome Powell's press conference for hints at potential policy decisions for 2025. You know, the Fed is kind of in a weird spot right now. Things are overall great. You know, the job market is healthy. And inflation is lower than it was before, but it's still not quite at the Fed's 2% target. Inflation has been hovering around

the 2.5% range for months now. It's been annoyingly sticky at that range. So I wonder if the Fed will pause rates for a couple months next year in order to get inflation under 2%. We should learn more today. The Fed's interest rate decision is going to be at 2 p.m. Eastern, followed by Jerome Powell's press conference, which is going to start at 2.30 p.m. Eastern. I'll be tuning into that press conference and we'll recap the Fed's decision along with any interesting comments from Jerome Powell on tomorrow's episode. Let's run through some headlines. Honda and Nissan are exploring a potential merger. If these two Japanese automakers were to combine,

they'd create a $54 billion company and become the third largest automaker in the world by sales. Now, the reason for this potential merger is that both Honda and Nissan have been struggling lately to compete with rivals like Tesla and these upcoming Chinese automakers like BYD. The rise of these new automakers has impacted the sales of Honda and Nissan all over the world,

especially Nissan. Because of declining sales for Nissan and New York, China and the U.S. They saw an 85% drop in profits in the second quarter. And the company had to announce last month that they're cutting 9,000 jobs as a result. So Nissan has been struggling big time. And some companies have been circling Nissan like vultures to potentially take them over. One of those companies being Foxcon, a Chinese company whose main business is manufacturing iPhones. They're reportedly looking into taking a controlling stake of Nissan. Now, Honda has been struggling to not as bad as Nissan, but what was surprising to me was that both Honda and

Nissan sell about the same amount of cars every year, about $2.8 million. I for some reason thought that Honda way outsold Nissan, but that's not the case. Honda does have more than four times the market cap as Nissan, so they should have the upper hand when it comes to this potential merger. Now, a merger isn't official yet. It's not even guaranteed to happen, but both these companies did say that they plan to have a technology partnership to help take on their rivals. Both these companies have a lot of work to do to catch their number one rival, which is Toyota. Toyota is the biggest automaker in the world. They sell over 9.4 million cars a year. So even a combined Honda and Nissan automaker wouldn't beat Toyota in sales. Investors were liking this news.

Those Nissan shares were up 24% on this news, while Honda shares dropped 3%. Both of their shares are still down for the year. So not a great year for both these companies. By the way, I've driven Honda's my entire life. I had a Civic. I had a Honda Accord. I had an accurate TL, which was made by Honda. And then this year, I switched to a Tesla Model Y. I'm a perfect example of why Honda is struggling a little bit. Let's shift gears and talk about another Chinese company that might be banned in the US. TPLink. And we've been talking about the TikTok ban all week. While the Chinese router maker TPLink might get banned next because investigations have found that TPLink devices contain security flaws. This is kind of a big deal because TPLink controls around 65% of the American router

market. And according to a report from Microsoft, a Chinese hacking group has been able to create a large network of compromised network devices, mostly comprising of TPLink routers to take advantage of these vulnerabilities. And these vulnerabilities have been used to launch numerous cyber attacks. You know, this TPLink story has a lot of parallels to TikTok. Similar to TikTok, the company saw huge growth during the pandemic. Before the pandemic, TPLink only had around a 20% market share of routers in the U.S. And today they have over 65%. Because of the pandemic, everyone was working from home, and a lot of people had to upgrade their home office. Tp. Link had the cheapest routers, and that's how they were able to grow their

market share to a dominant position that it is today. Actually, I think I have a couple TP. Link devices at my house right now, so I might need to start looking for some alternatives. But yeah, TP Link might be getting banned soon, because according to the Wall Street Journal, a ton of agencies are looking into them right now. Let's talk about some stocks making moves today. Shares of Nvidia are up this morning after the chip maker announced a new product. It's a small AI-powered computer that they're calling Jetson Oren Nano. Now, this isn't a groundbreaking device or anything. It's kind of like a Raspberry Pi computer, if you guys have seen those, but I guess it's going to have AI. And it's going to sell for around $250. It's made for like hobbyists and people that want to do

robotics and stuff. So it's not going to have a huge impact on their business. But hey, their stock is still up more than 3% this morning because of that news. So I think investors will take that because Nvidia's stock has been in the dumps lately down more than 10% from its all-time highs from last month. Now, on the flip side, shares of General Mills are down this morning after the serial maker reported earnings and cut back their profit expectations for next year. Now, the results for this past quarter were pretty decent, both sales and profits beat Wall Street estimates, but executives at the company aren't optimistic about the business moving forward. They expect sales to be flat in the upcoming year.

The company is also planning to increase promotions and cut prices to win back customers, but that will hurt their profits as well. Shares of General Mills are down around 3% this morning in reaction to these earnings. I got to say, though, General Mills has a stacked breakfast catalog. I mean, their cereal lineup includes Cheerios, Cocoa Puffs, Lucky Charms, but they also own Gogherts, which was a staple for me when I was a kid. But I think these days parents might be cutting back on these super sugary cereals and snacks. Let's wrap the show with a fun fact.

Instagram is expected to generate 50% of META's U.S. ad sales in 2025. This is according to research firm E-marketer. Sometimes I'll see comments about how Instagram is dead. Well, that's not what the numbers say. The app is estimated to bring in $32 billion in advertising revenue in 2025, which would be up 24% from this year. Now, the big reason for Instagram growth continues to be video content. E-marketer says that users spend close to two-thirds of their time on the app watching videos,

mostly watching Instagram Reels, which is their TikTok rival. So, yeah, Instagram is an absolute juggernaut. And I wouldn't be surprised if Instagram outperforms these expectations, especially if this TikTok ban ends up going into place. It's still crazy that meta, which was called Facebook at the time, bought Instagram for just a billion dollars in 2012. And what's also funny is that a lot of people at the time thought that Facebook overpaid because Instagram was just a photo sharing app.

Well, Zuck got the last laugh because since the acquisition, Instagram has grown its user base from 30 million to over 2 billion globally. That might end up going down as one of the best acquisitions of all time. Well, all right, guys, that's the run. down for today. Hope you guys enjoyed today's episode. And thank you guys so much for all the nice comments yesterday on Spotify about my eye surgery. Everything went well, so should be back to normal. Thank you guys so much for listening. Shout out to Mike and Connor for all the help behind scenes. And we'll see you guys back here tomorrow. This is the rundown, your real-time resource for

news events and trends in the markets. All views presented in the show reflect the opinions of the guests. You should not take any mention of a publicly traded security as recommendation to buy, sell, or hold that security. Rundown guests are not financial advisors and are not affiliated with public holdings or its subsidiaries. You should make your own financial and investment decisions. or consult, respective professionals, learn more at public.com disclosures. In partnership with Zaidamani, brokerage services for U.S. listed, registered securities are offered by Open to the Public Investing Incorporated, member FINRA and SIPC.